Maruti Suzuki Profit Declines, but Beats Forecast

By Nikhil Gulati

NEW DELHI — Maruti Suzuki India Ltd. Saturday posted a third straight drop in quarterly profit, as weaker rupee increased the cost of imported auto parts while demand for gasoline-powered vehicles remained subdued.

India’s largest car maker by sales said profit for its fiscal fourth quarter ended March 31 fell 3% to 6.4 billion rupees ($122 million) from 6.6 billion rupees a year earlier. The figure, however, beat the 5.68 billion rupees average of estimates in a poll of 12 analysts.

Sales rose 17% to 114.86 billion rupees from 97.97 billion rupees a year earlier. The margin on earnings before interest, tax, depreciation and amortization improved to 7.8% as compared to 5% in the previous quarter.

Demand for gasoline cars and sport-utility vehicles remained tepid in the past financial year as loans and fuel continue to be expensive. But those of their diesel counterparts continues to grow due to higher fuel-efficiency and the cheaper cost of the fuel.

While prices of gasoline were decontrolled by the government in June 2010, it continues to regulate diesel prices due to a direct bearing on inflation. The fuel is used by trucks and railways to transport essential goods across the country.

Maruti said last month its vehicle sales growth remained muted in the past year as it couldn’t make enough diesel engines to meet demand. That prompted the New Delhi-based auto maker to set up a new diesel engine plant at an investment of 17 billion rupees which will start production by the middle of 2013.

But in the January-March period Maruti, however, managed to partially recover from the woes of a labor stir that had impacted production and severely hurt profit at the of Suzuki Motor Corp. unit in the previous two quarters of the last financial year.

The company’s profit in the October-December quarter declined 64% to 2.06 billion rupees, the lowest in almost three years, while it posted a 60% fall in profit for the July-September quarter to 2.4 billion rupees due to the labor stir.

Maruti was grappling with labor problems at its Manesar factory in northern Haryana state since June last year that affected vehicle production.

Maruti said adverse currency movements made a “significant impact” on its profit in the past quarter but the company was able to minimise the effect by controlled costs and buying more parts from local suppliers.

“The overall slowdown in the car market, including the skew towards diesel cars, also affected performance,” the company said in a statement.

The company pays royalties to Suzuki for sourcing technology and vehicle platforms. A stronger yen also increased the cost of components that the New Delhi-based car maker and its vendors import from Japan.

The company sold 360,334 vehicles in the quarter, up 5% from a year earlier.

Maruti said its raw material costs, however, rose 18% to 88.74 billion rupees.

Maruti expects vehicle sales to increase 10% to 12% on year in the current financial year that started April 1. It expects 10% growth in car sales in April, which are scheduled to be announced next week.

For the last fiscal year that ended March 31, the company’s net profit declined about 29% to 16.35 billion rupees on sales of 347.06 billion rupees, down 3% on the year. Its vehicle sales fell nearly 11% to 1.13 million units.